nep-ind New Economics Papers
on Industrial Organization
Issue of 2013‒01‒19
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. On the Feedback Solutions of Differential Oligopoly Games with Hyperbolic Demand Curve and Capacity Accumulation1 By L. Lambertini; A. Palestini
  2. Information and Learning in Oligopoly: An Experiment By Bigoni, Maria; Fort, Margherita

  1. By: L. Lambertini; A. Palestini
    Abstract: We characterise the subgame perfect equilibrium of a differential market game with hyperbolic inverse demand where firms are quantity-setters and accumulate capacity over time à la Ramsey. The related Hamilton-Jacobi-Bellman are solved in closed form both on infinite and on finite horizon setups and the optimal strategies are determined. Then, we analyse the feasibility of horizontal mergers in both static and dynamic settings, and find appropriate conditions for their profitability under both circumstances. Static profitability of a merger implies dynamic profitability of the same merger. It appears that such a demand structure makes mergers more likely to occur than they would on the basis of the standard linear inverse demand.
    JEL: C73 L13
    Date: 2013–01
    URL: http://d.repec.org/n?u=RePEc:bol:bodewp:wp862&r=ind
  2. By: Bigoni, Maria (University of Bologna); Fort, Margherita (University of Bologna)
    Abstract: This paper presents an experiment on learning in repeated games, which complements the analysis of players' actual choices with data on the information acquisition process they follow. Subjects play a repeated Cournot oligopoly, with limited a priori information. The econometrics hinges on a model built upon Experience Weighted Attraction learning, and the simultaneous analysis of data on the information gathered and on actions taken by the subjects. Results suggest that learning is a composite process, in which different components coexist. Adaptive learning emerges as the leading element, but when subjects look at the strategies individually adopted by their competitors they tend to imitate the most successful behavior, which makes markets more competitive. Reinforcement learning also plays a role, as subjects favor strategies that have yielded higher profits in the past.
    Keywords: information, imitation, Cournot oligopoly, EWA learning
    JEL: L13 C92 C72
    Date: 2013–01
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp7125&r=ind

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